from the what-happens-when-you-get-formulaic dept

For almost a decade, we've been dealing with variations on the question an executive from NBC Universal once asked me during a panel discussion about copyright: "But how will we keep being able to make $200 million movies?" As we've explained over and over in the years since, that's a ridiculous question. Would anyone in the tech industry ever ask "but how will we continue to make our $5,000 computers?" Of course not, because the focus is on making something profitable that's good and serves a need. Focusing on the cost is exactly the wrong way to go about things. That doesn't mean that no movies should cost $200 million. If you can come up with a movie that can make more than that in response, then sure. But Hollywood seems built not around figuring out how to make something profitable, but by following a formula. And part of that formula is "every summer we release some big budget, action-packed ~$200 million films that we call blockbusters" and that's the focus.

Except, when you follow a formula that says "we do this because this is what we do" rather than "how can we create something that people will like and will bring in more money than we spend?" (Yes, I recognize this is simplifying things, like skipping over Hollywood accounting, where films are designed to "lose money" even as the studios make money on them).

"That's the big danger, and there's eventually going to be an implosion – or a big meltdown," Spielberg said. "There's going to be an implosion where three or four or maybe even a half-dozen megabudget movies are going to go crashing into the ground, and that's going to change the paradigm."

With extremely weak domestic ticket sales over the weekend for “R.I.P.D.” and “Turbo,” Hollywood has now sustained six big-budget duds since May 1, the start of the film industry’s high-stakes summer season. The other failing movies have been “After Earth,” “White House Down,” “Pacific Rim” and “The Lone Ranger.”

Each of those films was well over $100 million to make, with a few breaking that magical $200 million. A big part of the problem? These movies are all just formulaic retreads of the past -- playing on the stupid idea that "well, we need a $200 million movie, so how do we make one?"

Studios have also tried to sell most of these as “original,” which in Hollywood-speak means not a sequel or a remake. In reality, movie companies have largely just reassembled familiar parts. “Pacific Rim,” which featured giant robots, seemed to share DNA with “Transformers.” “The Lone Ranger” was “Pirates of the Caribbean” in Old West drag. “R.I.P.D.” was “Men in Black” lite.

Meanwhile, the movies that are doing well are the lower budget films.

Moviegoers are pushing back. The No. 1 movie in North America over the weekend was “The Conjuring,” a period haunted house film that cost Warner Brothers $20 million to make and received stellar reviews. It took in $41.5 million, according to box office estimates compiled by Hollywood.com.

Of course, Hollywood folks will point out that you never really know how a movie is going to do, and it's something of a crapshoot. Indeed, but in that case aren't you better off testing your luck with 10 $20 million movies rather than dumping $200 million all into one boring retread?

Again, the idea is not that there should never be $200 million movies -- but it's long past the time that Hollywood focused on "how to make $200 million movies" which leads to an awful lot of formulaic stuff that the public appears to be sick of watching. Instead, it's time to focus on how to make good profitable movies. That usually doesn't involve following a formula, but rather finding quality content, and figuring out how to make it efficiently, not how to keep ratcheting up the budget just to fit it into some pigeonhole about what a "summer blockbuster" has to look like.

from the understanding-business-models dept

There's an interesting new article in the Harvard Business Review that looks to challenge Chris Anderson's well-known theory of "the long tail." In it, a Harvard professor, Anita Elberse, talks about how hits still make a lot of money, and the idea that all the money is now over in the long tail doesn't seem supported by reality. Chris himself makes some very good points in response, noting that some of this depends very much on where you "draw the line" between the hits and the tail. Since there's a sort of "fat middle," small changes in where you draw the line of what counts in which category can have a big impact. Chris makes a compelling argument that Elberse chose to draw the line in the wrong spot. He uses the inventory of various brick-and-mortar stores to determine where the line should be drawn, rather than at the somewhat arbitrary 10% and 1% lines that Elberse used.

However, I'd like to argue from a different angle as to why the HBR piece is missing the point. I don't think that anyone ever said that you completely ignore the hits. Perhaps it's a problem of the name "the long tail" but it starts to make people focus all the way at the end of the tail -- the part that is the least profitable. It's the point where only one copy of something is sold every so often. The companies that suddenly announced they were going to focus on the long tail seemed to think that you focus only on that tip at the end. That was not the point at all. You don't ignore the hits -- you just recognize that with infinite shelf space, you can now supply much more beyond the hits -- and that aggregate amount can add up to a substantial sum that no store with limited shelf-space can match. So, Elberse is completely correct in suggesting that companies don't just focus on the tail end of the tail -- but anyone who did so in the first place was misinterpreting the point of the long tail concept.

Even more to the point is that the concept of the long tail changes the shape of the market. When shelf space was limited, it made it that much more difficult to even get a creative work produced at all. You had to be able to convince someone that your work would make it into the "hits" category, and then get them to finance the creation of the work. And, anything that didn't actually become a hit fell off the chart completely. You basically had a bimodal distribution of content: the hits that sold, and the crap that didn't and was no longer available. But there was a hidden third category that most people didn't think of: the stuff that didn't get created at all because it wouldn't sell enough alone to justify it.

Yet, with the combination of cheaper tools for content creation, combined with cheaper distribution tools and infinite shelf space, that third "hidden" category started to exist in the open, where it was invisible before. And, on top of that, many of the works that fell into the "crap" end of the old model, could migrate into the long tail and make enough sales to be decent. But the point remains that it spread out the distribution, made it possible for much more content to both be created and sold -- and there are plenty of companies capitalizing on that. That doesn't mean that the hits go away or that the long tail concept doesn't make sense. It just means that you don't focus on the long tail by only focusing on the crap end of the long tail -- but on the entire distribution.

from the it's-got-plenty-of-life dept

Cory Doctorow, who can often write and speak quite convincingly concerning copyright issues, has written a new article for The Guardian in the UK that is unfortunately unconvincing. The discussion surrounds the question that has been asked of me in the past when discussing copyrights and movies: if there were no copyrights, how does the $200 million blockbuster movie get made? Cory's answer is that it doesn't get made... and that's okay. His argument is, effectively, that there's a tradeoff. And, instead of a few $300 million blockbusters (inflation, apparently, has driven up the price), we'll get many more smaller, independent films or amateur creators creating their own works. In other words, the long tail takes over and the "short head" disappears. He has some well known company, by the way. As we've mentioned, George Lucas seems to believe the era of the $200 million blockbuster is over. To Cory (and to many others, I'm sure) the idea that there would be more, cheaper indie films and less Hollywood blockbusters, seems like a worthy tradeoff. I have no opinion on whether one scenario is better than the other or if it's a worthwhile tradeoff. I don't think there's really any tradeoff to deal with at all. In fact, from everything I've seen, the blockbusters can still stick around without freakishly worrying about copyright -- and you'll still get more of the quirky independent films. In other words, everyone wins (and yet, I'm quite sure the big movie industry folks who frequent this site will insist what I'm describing means the death of their films).

First of all, it's important to separate out the $200 million (or $300 million) part from the "blockbuster" part. I have a problem with anyone phrasing the question in terms of the requirements on the cost side. First of all, studies have shown that while the biggest costs for most of those blockbuster movies is the fees paid out to the name-brand stars, those stars don't help a movie do any better. In other words, movie makers are overpaying for stars. That shouldn't be a surprise, actually. When you come from a world where "$200 million" is automatically attached to "blockbuster" there's little reason to think about ways to make a movie more efficiently. You just think about driving up the budget so that the movie is considered a blockbuster because of how much is spent. This doesn't mean, by the way, that you don't hire stars. You just figure out ways to pay them more reasonable rates. At the same time, in just about every other part of the creativity world, the cost of making content is decreasing. Better tools and technologies are making it much cheaper to make much higher quality movies every day. So really what we have is a situation where adding a little competition to the market doesn't mean that the blockbuster, super high quality flicks go away -- but that perhaps they get a little more dollar conscious on the spend side, allowing them to make movies more intelligently to save money. We had hoped that with Wall Street's new found interest in investing in films, that perhaps they would force some of this to happen.

At the same time, there are still plenty of ways for big, expensive movies to make a ton of money -- even if the focus isn't on copyright. It just requires a shift in thinking. We've been saying it for years, for example, but the movie industry has never really relied on the sale of its content to make money before. It thinks it has, but it's always been selling a combined service with the theaters. It's been selling the "experience" of going out to the theater and having a good time with dates, friends or family and getting to watch a new flick on a big screen in comfy seats and a great sound system. It's only more recently, with much of the industry being confused about what they're actually selling, that the movie going experience has declined -- which is a hurting the industry much more than a few downloads ever will. So even if you were in a world without any copyright, there would still be demand for people to go out to watch movies in the theaters -- and the movie industry can continue to make an awful lot of money that way. The restaurant business isn't suffering from the fact that people can cook much cheaper food at home. People like to go out and have a good time -- and they're willing to pay for it.

Furthermore, there are a ton of interesting business models that you can start to build on top of this. These include doing things like selling a DVD with a bunch of extras of the movie people just saw as they leave the theater. That's the point at which they're going to be most interested (assuming they liked the movie) and if the DVD comes with a ton of extras in a useful format and a convenient interface, that's going to be worth buying -- even if they could download the content for free online. Or you could start to include other incentives. Since sequels are so popular these days, why not offer a discount on admission to folks who have the movie stub from the first movie in the series? Or offering a contest where a ticketstub or DVD purchase receipt gets you entered into a raffle to be an extra on another film? These are small examples, but it doesn't take long to come up with a hundred more examples, where the focus is on providing additional value that people will pay for -- even if the content itself is available for free. When you start to look at those models, and start to put a few of them together, you begin to realize that there are more ways than ever to make a lot of money in the movie business, even if copyrights are not an issue at all.

Finally, long tail markets don't exist in a vacuum. They follow the power law curve, meaning that there will remain blockbusters -- it's just that the bottom part of the market does open up for many more producers to enter with more niche-focused content. However, demand will still remain for blockbusters, and that's great. With the demand there, smart business people will start to adopt the business models that allow those people to be satisfied with the next big blockbuster flick. And, don't underestimate other sources of funding films as well. BMW realized that it made sense to make short films a few years back, without worrying too much about monetizing those films directly. Don't think they (or others) couldn't do the same for much larger films as well. So, yes, blockbusters will remain -- though the business models to support them may start to look a little different.